Hanger Orthopedic: A Steady Play in Medical Devices

Our newest addition to the Zacks senior equity analyst lineup is Christopher Titus, CFA, who covers the medical devices and supplies industry in the overall healthcare sector. We sat down for a brief get-to-know-you session recently.

How have companies in your coverage performed this earnings season – as expected, or were there some surprises?

Overall, the industry's performance was very strong. Of the 33 companies I follow, 22 either outperformed or were in line with our estimates.

In general, healthcare stocks seem to have a strong outlook. Would you say medical devices should have some strength overall, similarly?

Medical device companies should continue performing well over the next one to two years. As evidence, roughly half of the companies either increased or reiterated already strong FY08 guidance.

Where do you see the biggest gains coming from within the sub-sectors of this industry?

The orthopedic group has shown consistently solid growth and returns for a number of years. We believe this should continue and will be supported by demographic trends. We think the most recent quarter demonstrates this continuation.

Which stocks are your top Buy recommendations at this time?

The orthopedics group. At this point, Hanger Orthopedic Group (HGR) is our only Buy-rated stock in that group. ArthroCare (ARTC), a manufacturer of coblation technology, is our other Buy-rated stock. However, ARTC has reached our target price, rising 21% since our last report.

Is there anything the average investor should know about pursuing medical devices stocks that they may not know?

As with all stocks, investors need to be conscious of the risks involved. The medical device industry in the aggregate has produced fairly consistent results for some time now. However, on an individual basis, many names are quite volatile.

Investors shouldn't lose sight of continual innovation and the infrastructure required to support such innovation. This makes it that much more difficult for smaller players to compete when it comes to implementing speedy clinical trials, navigating regulatory channels, obtaining choice reimbursement codes, and executing manufacturing and marketing.

Christopher Titus, CFA is a senior analyst covering the medical devides and supplies industry for Zacks Equity Research.

Comments

[AJ30:]

Is there an ETF that specializes in these Ortho Mfrs.?

2008 Jun 03 07:33 AM

[AJ30:]

What caused the huge share price drop in 3rd qtr 2004?

2008 Jun 03 07:39 AM